An unbiased variance estimator for overlapping returns

Pauline Bod, David Blitz, Philip Hans Franses and Roy Kluitman

Applied Financial Economics, 2002, vol. 12, issue 3, 155-158

Abstract: This paper gives an unbiased estimator of the variance of overlapping returns. The estimator improves upon that proposed in Lo and MacKinlay (1988) [LM] (which is widely used in practice), as the LM estimator is consistent but not unbiased in small samples. The relevance of unbiasedness for variance ratio tests in a simulation experiment is illustrated.

Date: 2002
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DOI: 10.1080/09603100110090127

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